How to lose $1 billion in video poker

After it was revealed that San Diego’s former mayor Maureen O’Connor took $2 million from her dead husband’s foundation to support her gambling addiction, wagered more than $1 billion at casinos around the country and ended up with $13 million in net losses, one question was why.

The other: how?

“That is an amazing number,” said Victor Rocha, an Indian gaming expert with Pechanga.net, based in Temecula. “I thought it was a typo,”

But a little math shows that, yes, it is technically possible to churn through $1 billion in nine years playing video poker, the game prosecutors say O’Connor, 66, preferred.

Michael Shackleford, who runs the gambling mathematics website WizardOfOdds.com, offered this extreme scenario: “Let’s say she’s betting $500 a hand and let’s say she's playing 500 hands an hour. That’s $250,000 an hour. Let’s say she’s playing 40 hours a week. She’s betting through $10 million a week.” To bet $1 billion and continually lose, someone would have to sustain that pace for 100 weeks — just under two years. If someone bet smaller amounts, won occasionally or played less frequently, it could take nine years.

A clear picture of O’Connor’s gambling habits has not yet emerged, but these calculations, however rudimentary, back up what several experts said: that amount is astounding, but not unfathomable.

O’Connor’s fall from grace is a reminder that gambling addiction is far from a poor man’s problem. Casinos court high-rollers and low-rollers with equal verve: for one the free prime rib dinner, for the other, free VIP Super Bowl tickets. “The best players get just about anything they ask for,” Shackleford said.

In gaming industry speak, desirable clients are called whales and casinos will go to great lengths to hook them.

O’Connor was a “whale.”

O’Connor’s high-betting volumes and huge losses make her a jaw dropping statistic in gambling history. Her story unfolded against a backdrop that apparently made it easy for a person of means to breeze through a fortune by gambling in her own backyard as well as from coast to coast.

What is it about video poker?

“Video poker is not poker,” clarified Brian Rast, a professional poker champion based in Las Vegas. “It’s almost offensive to a poker player to say it’s the same thing.” It’s a slot machine style game where people are playing against an algorithm.

In a nutshell: you make a bet, the machine deals a five-card hand, you choose which cards to hold and which to discard, the machine deals replacement cards, and then you pay or get paid according to your final hand.

Wendy Reeve, executive director of Casino Operations with Sycuan Casino, said video poker gives players an illusion of control. For that reason, she surmised that it’s popular with people in positions of power who like slot-style games.

“As a high-powered person, video poker would be a lot more enticing … than a slot machine. You can change the outcome based on the cards you select. You think you’ve got an element of control. … That’s why people get addicted.”

An Oregon study in 2003 found that almost three quarters of gamblers in addiction treatment programs enrolled because of video poker, which some have dubbed “video crack.” Slot machines were second, with 10 percent. A book published in 2005 about the link between Indian gaming and personal bankruptcy rates argues that machine games are designed to be both addictive and effective at generating revenue.

“These machines combine quick-cycling, sensory-rich experiences, the psychologically attractive principle of intermittent reward, and the statistically inevitable house advantage which are assured to produce significant gambling losses over time,” the authors write.

To casinos, though, video poker players are actually rather low value because the house edge, or mathematical advantage, is lower than for slot games: between half a percent to five percent, compared to eight to 15 percent for slots, Shackleford said. High denomination games (those with $500 bets, versus a quarter) have better returns on bets, he added.

Given these odds, how does O’Connor’s performance stack up?

“Claiming she lost 1.3 percent of the billion, that certainly is what I would expect of a recreational player. Assuming that the billion means total amount bet, I would expect a novice player would lose about 13 million or more,” Shackleford said.

“She would set off triggers”

In the track-every-move, panoptic world of modern gambling, casinos know what their patrons are spending, winning and playing, down to their preferred brand of cigarettes. That makes casinos equipped to better court customers, but also to identify potential addicts.

At the smaller San Diego County casinos, someone playing as frequently or with the kind of money O’Connor was throwing around “would set off triggers,” Rocha said. “I can’t believe she would have gambled without setting a lot of alarms.”

“We look at players on a weekly basis,” she said. “We look and see how much they’ve played, because that’s connected to our revenue. If all of a sudden there’s a large increase, (we ask) what happened here?”

Do casinos have a responsibility to prevent or combat problem gambling?

In Nevada, the state’s requires that casinos help problem gamblers. Casinos must post gambling addiction hotline numbers in visible places, they must offer patrons the option to fill out self-exclusion forms, which prevent casinos from letting the patrons back for a set period of time. Their staff are trained to look for problems, said A.G. Burnett,﻿ chairman of the Nevada Gaming Control Board.

Tribes control their own casinos in California, so there’s no blanket law, but at least half have programs in place, said Terri Sue Canale, Deputy Director with the California Office of Problem Gambling.

And a casino’s willingness to extend credit to customers makes it more enticing.

At various casinos, bettors can also apply for check cashing loans and credit card advances through a third-party merchant at the casino.

Shackleford said some casinos offer high credit limits, around half of a client’s bank balances “for a person off the street” and more for trusted clients.

Charger legend Junior Seau, for example, was extended millions of dollars in casino credit during his many visits to Las Vegas.

“Casinos love to poach each other’s big players and they are pretty good about extending credit to good players at other casinos,” Shackleford said.

The fine line

Unlike bar owners, who are liable for the actions of their intoxicated patrons, casinos don’t have such liability. And unlike alcohol and drug addictions, which are devastating in their own ways, gambling addictions don’t leave visible physical traces. Merely financial ruin.

“The weird thing about gambling is, there is no overdose. You couldn’t drink a billion in your lifetime,” said Marc Lefkowitz, a California certified gambling counselor who works with casinos to develop responsible gaming programs.

Casinos say they attempt to stamp out irresponsible behavior, but they also court the kinds of customers who are almost guaranteed to be profitable for them.

“It’s a fine line,” Burnett said. “There may be people who spend a lot of money but don’t have a gambling issue. They’re what we call high rollers. They may lose a lot of money but they win a lot of money as well. Our casinos today are fairly well trained and very cognizant of when a person has a problem.”

Rocha, the Indian gaming expert, observed that a casino’s motivation is profit first: “They’re all trained to watch for theft. We’re not necessarily trained to watch for addiction.”

In teaching casinos how to identify problem gamblers, Lefkowitz said he’s seen plenty of gambling addicts in Southern California — growing on par with the rise of casinos and the general rise in social acceptability of gambling as a pastime.

“The greater the accessibility, the closer people are to casinos, the more likely somebody has an opportunity to develop a problem. They’re more accessible in San Diego County,” he said.

Rocha and others in the industry cautioned anyone against blaming O’Connor’s — or anybody’s — addiction on the casinos or their proximity.

“With the advent of online gaming, you don’t even have to go down the street anymore. The prevalence of gambling and the ability to get addicted is just a mouse click away,” Rocha said.